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2 Weight Loss Stocks That Are Screaming Buys In December
With drugs like Novo Nordisk's Wegovy becoming household names over the last couple of years, it's no surprise that there are quite a few opportunities to invest in the burgeoning market for weight-loss medicines.
There are a pair of businesses that are particularly appealing on the basis of their proven or potential ability to compete in that market. Both of these companies have outperformed the market for at least the last 12 months, and there's ample reason to believe that the outperformance could continue for a few more years. So without further ado, let's analyze both to understand why they're worth rushing to buy.
1. Zealand Pharma
Zealand Pharma (OTC: ZLDP.F) is a biotech with a pipeline that's full of promising clinical-stage weight-loss programs, among other indications.
In particular, its lead anti-obesity program, a molecule called survodutide, is in phase 3 clinical trials right now, and it's unique in the sense that no weight-loss drug on the market right now utilizes the exact same mechanism of action. Therefore, if survodutide is one day approved for sale, it could potentially be more effective or more tolerable than other medicines.
Or, it could find a niche as a viable alternative for patients who don't respond to, or tolerate, those other medicines. This would represent a smaller but likely still sizable market. The biotech also has a pair of other weight-loss programs, one in phase 1b trials and one that will soon start its phase 2b trials, both of which are similarly unique in terms of how they work.
Importantly, that means this stock is exposed to a handful of powerful catalysts over the coming years as those programs proceed through their clinical trials and publish new data. But there's another piece of the puzzle that makes the investment thesis for buying it right now even stronger.
Zealand's only revenue is from its collaboration agreements, licensing of its programs, and other research and development (R&D) partnerships; it aims to find collaborators to launch drugs with rather than doing all of the commercialization-related activities itself. In terms of its runway, it has around $1.3 billion in cash, cash equivalents, and short-term investments, and trailing-12-month (TTM) operating expenses of $172.7 million.
So, it has plenty of time to finish up the development of its weight-loss candidates before needing to consider raising more funds, and plenty of time to find a partner for taking on the costs associated with commercialization and manufacturing.
2. Eli Lilly
Eli Lilly (NYSE: LLY) is a screaming buy because it makes the most potent weight-loss drug that's on the market right now, Zepbound. Zepbound is already a blockbuster less than a year out from its launch, with the company reporting third-quarter sales of $1.2 billion. But that is likely just the start of its tenure as a star earner.
On Dec. 5, Lilly announced a $3 billion investment in expanding one of its manufacturing facilities for the drug, joining $23 billion in prior similar investments since 2020 alone. Spending such a huge amount on manufacturing capacity alone should be a dead ringer to investors that Lilly is planning on making and selling a gargantuan amount of its weight-loss therapies in the near future, which should send highly bullish signals to the market.
Of equal importance is the pharma's ongoing investments into its pipeline programs, many of which are dedicated to expanding the approved set of indications for Zepbound. In November, it published new data indicating that patients with heart failure and obesity experienced a significantly lower risk of having worsening heart failure when taking Zepbound. It's already talking with regulators at the Food and Drug Administration (FDA) regarding expanding the drug's indications to account for the new information, which, if successful, will expand its total addressable market even further.
And that's not even taking into account all other anti-obesity medicines Lilly has in its pipeline, including candidates that are even more advanced than Zepbound. With a winning medicine in hand today, and more likely on the way, it's hard to be bearish about this business's prospects in selling weight-loss drugs.
Still, it's important to keep in mind that this company will not be a screaming buy forever. As more competitors enter the market for weight-loss drugs, Lilly's market share will inevitably come under pressure. Plus, its valuation is already a bit higher than what may be sustainable in the long term. So don't be afraid to buy this stock; just be aware that the longer you wait, the greater the chances of missing out on the remainder of the period when it'll be experiencing its most intense rate of growth.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
